Before I share my views on it, let me share my recent experience of a near miss.
It happened on a Wednesday. I had picked up my son from school and was driving to a nearby McDonald’s for a quick bite. My son had a craving for Oreo McFlurry. As for myself, I would go with my usual medium-sized latte to enjoy a pleasant afternoon, a typical father-and-son time of bonding before heading home.
We were just one intersection away from McDonald’s. My car was the first to reach the intersection and I stopped just behind the line closest to its traffic light. Shortly, the traffic light turned ‘Green’, I stepped on my accelerator and started to cross the intersection. It was then…
From my right side, a red Honda Jazz accelerated as it attempted to drive across the intersection to the road on my left. It caught me by surprise, and as a result, I hit the brake immediately and honked at the Honda Jazz as hard as I could. My car stopped, and so did my heartbeat at that moment. Can’t imagine how my son felt.
The Honda Jazz responded too. It managed to cut in front of me and halted, inches away from colliding with my car. What an unbelievable escape that was! Out of frustration, the driver honked louder, wound down his window, started cursing and showed his ‘Middle-Finger’. Then he drove away and I chose not to respond.
A scare, it was. But, fortunately for us, we arrived at McDonald’s safely and still managed to have a great time together.
Do You Know?
Before 1 July 2017, I was paying the same amount of motor insurance premium as the ‘irresponsible driver’ mentioned above. Was this fair?
However, this was because motor insurance in Malaysia was tariffed before 1 July 2017. Motor insurers were not allowed to fix their own prices for motor insurance products as prices were set by Bank Negara Malaysia (BNM). It is different from getting a life or medical insurance policy. Let me explain:
Years ago, I bought myself a life insurance policy. My premium was determined by several factors such as my age, gender, my health condition, and as well as lifestyle habits. In my case, I was in good health when I purchased that policy and thus, paid the standard rate for it.
It would not be fair to the healthy people if smokers, drinkers, diabetic patients, or anyone with poor health conditions pay the same amount of life insurance premiums. The reason is that they are more likely to have claims from insurers as compared to other pool of customers who are healthier.
Negative Impacts of Motor Insurance Tariffs
In my opinion, a tariff on motor insurance is similar to having smokers pay the same insurance premium as non-smokers. That, I believe, is not fair and similar to drivers who are responsible on the road. It is a system which was skewed in favour of irresponsible drivers as there were no incentives to reward exemplary driving ethics and behaviour in our country.
Despite nationwide road safety campaigns, we have:
- Consistent Growth in Road Crashes, from 363,319 in 2007 to 521,466 in 2016.
- Rising Amount of Road Deaths, from 6,282 in 2007 to 7,152 in 2016.
- Our Local Motor Insurers Paying RM 14.7 million per day in claims for property damage, bodily injury, and vehicle theft.
Source: Malaysian Institute of Road Safety Research
It’s Time to Liberalise Motor Insurance
As I write, the Malaysian Government has set a target to reduce road accident deaths by 50% by 2020 onwards. One of the efforts being taken to achieve these targets is to liberalise our local motor insurance premiums which begun on 1 July 2017.
Today, motor insurers are allowed to offer their products at rates varying not more than 10% (or +/- 10%) from the tariffed premium previously set by BNM.
From 2019 onwards, BNM would evaluate the progress of this liberalisation and would work towards a full liberalisation if Malaysians are ready for it. As a result, it is up to the motor insurers themselves to set prices for their insurance products freely to consumers.
So, does it mean Higher Motor Insurance Expenses to Us?
Not necessarily. Firstly, it is crucial for us to understand what are the possible factors taken into consideration when fixing prices for motor insurance products. These factors include:
- Drivers’ Profile
It is an assessment of the risk profile of a driver. It includes a detailed consideration of the driver’s age, gender, years of driving experiences and the drivers’ behaviour where part of the assessment may include checking the drivers’ motor insurance claims record. If you are a low-risk driver with good driving records, you may enjoy relatively lower premiums as compared to other drivers who are of higher risk.
- Vehicle’s Profile
It is an assessment of the risk profile of a vehicle which takes into account the vehicle’s model, age, maintenance records and installation of telematics or safety features and devices. In general, a car which is in good condition would enjoy lower rates as compared to an older vehicle which is not well-maintained.
Hence, if you have been adopting an exemplary driving behaviour and have kept your vehicle in good condition, you are in a position to enjoy lower rates for your motor insurance premiums as compared to other drivers.
Also, let us not forget about the maximum No Claim Discount (NCD) of up to 55% which is still applicable to us if we maintain a decent driving record.
Secondly, I believe, the liberalisation of the motor insurance premium is beneficial to consumers as insurers would compete for consumers’ dollars by:
- Offering Greater Choices of motor insurance products that are more targeted and tailored to the needs of consumers.
- Improving Customers’ Satisfaction by delivering higher standards of customer services that include greater professionalism across agents and superior after-sales services.
- Enhance Operating Efficiencies to reduce cost, which in turn, allows motor insurers to offer competitive prices for its insurance products!
However, with that said, it is also possible for our motor insurance premiums to go up after liberalisation. Let me explain. If all of us, Malaysian drivers as a collective unit, choose to drive recklessly and fail to maintain our vehicles in good condition, we are putting ourselves at higher risk of continuous growth in road accidents and road deaths in our nation.
This will lead to a rise in motor insurance claims. As a result, motor insurers would adjust their prices upwards to compensate for the surge in claim expenses.
Drive Safe. Save Money. Save Lives.
Monetary benefits that could be derived from safe driving are minuscule in comparison to the number of lives lost that could have been prevented if only we do our part as a responsible driver.
If you are reading this, I would like to invite you to drop a comment on ‘One Simple Thing that You are Doing Today to Drive Safely and Make Malaysia a More Drivers-Friendly Nation’.
I Want the Best Deal
Today, we have around 20+ general insurers and takaful operators operating in Malaysia. So, where do we start to find ourselves suitable motor insurance/takaful coverage products at their best prices from the best companies?
Here, I’ll share two links to allow you to shop around:
Persatuan Insurance Am Malaysia
Malaysian Takaful Association